Excelsior's property tax levy will jump more than 13% next year, at a time when many cities and counties are opting to keep levy increases low.
The increase means the owner of a $500,000 home — Excelsior's approximate median home value — will pay $49 more in property taxes next year than in 2020, said Marian Potter, the city's finance officer. Altogether, the city will receive $1,500 in taxes on that home.
The city will use the additional dollars primarily to pay for infrastructure improvements, including street and water projects. The City Council approved the levy increase, along with the rest of the 2021 budget, on Monday.
Preliminary statewide figures indicate 2021 levies will rise 2.5% overall, compared with an average of 4.8% in the previous three years, according to Nick Greene, property tax research director at the Minnesota Department of Revenue.
"During times of economic recession and broader financial hardship for taxpayers, local governments have tended to have slower property tax levy growth," Greene said in an e-mail. "In general, it's reasonable to assume that cities take into account unique circumstances in their community when setting their budget."
Pandemic restrictions this year meant revenue losses for cities, including Excelsior, which saw a decline in revenue from sales taxes and parking fees.
The city's levy increase will help pay for long-needed improvements to streets and water infrastructure, Potter said. Residents in some areas have complained of brown water, caused by rusted iron in the pipes, and the city has experienced several water main breaks within the past few months, Potter said.
Cities often defer such infrastructure projects for decades, Potter said, but the longer infrastructure improvements are put off, the more expensive they get.
The levy hike also reflects increased costs in the city's contracts with the police and fire departments.
Although Excelsior's 13.2% year-over-year levy increase is high for Hennepin County, its overall tax rate is on the low side compared with other Hennepin County cities. The tax rate is a percentage of a city's total tax capacity, a dollar figure calculated by the county based on property values and other factors.
Excelsior's tax rate is about 28%, the 14th lowest among the county's 45 cities. Four cities' rates are more than 60%, and Minneapolis' rate is just under that.
Some Minnesota cities are raising their property tax levies by far higher percentages than Excelsior, but most collect less in taxes overall. For example, the preliminary levy in Lengby, Minn., is more than double last year's — but that's $7,000 over last year's $13,000 final levy.
Katy Read • 612-673-4583